Investment Consideration Double digit revenue growth
Investment Consideration BUY
12 September 2018 Textile, Garment
Double digit revenue growth
PriceIDR 340
- As the new capacity expansion started to operate last year, SRIL grew double digits in 1H2018 and we expect sales to enjoy 35%-40% growth,
Target Price
IDR 510 net profit 20%-25% growth in 2018.
- In 1H2018, SRIL saw sales grow 36% yoy to USD 544 million, gross profit
JKSE Index 5,831.117 USD 98 million grew 13% yoy, operating income grew 45% yoy to USD 99.9 million and net profit grew 68% yoy to USD 56.3 million.
450 8,000
- Gross margin in 1H2018 was 18%, lower compared to 1H2017’s 22% due
400 7,000 to higher sales from the spinning segment. Net profit margin grew slightly
350 6,000 to 9.0% from 8.7% in 1H2017. 300 5,000
- As new capacity starts to operate and the utilization rate is higher, we
250 4,000 estimate 2018 sales and net profit will grow strongly at 37% and 25% to
200 3,000 USD 1.04 billion and USD 85.2 million respectively. 150 2,000 100 1,000
50 Expand the Spinning Sector
- SRIL has expanded their spinning sector by acquiring two spinning
companies in April 2018.
- The two spinning companies are PT Bitratex Industries (BI) and PT
Last price Volume (In Mn) Primayudha Mandirijaya (PM). SRIL acquired 100% of the shares in BI and PM with a total transaction value of USD 15.3 million.
- As of 1H2018 the spinning sector has contributed 48% of sales which is
Stock Information higher compared to the 1H2017 ’s 40%. However, the spinning segment has lower margins compared to other segments, causing the gross and
Bloomberg Code SRIL IJ Market Cap (IDR bn) 7,035.5 EBITDA margins to decrease about 1%-2%. 52-week high (IDR) 414
- In our view, there will still be a positive effect from the acquisitions as
52-week low (IDR) 302 they will boosts the company’s sales in the future. And the company plans
Shares issued (mn) 20,452 to maintain margins by maintaining their product mix (future higher
6-m avg. daily Val (IDR) 338 contributions of other segments such as finishing and garment segments). Free float (%) 39.90%
Valuation: TP 510, 51% Upside
Major share holders (%)
- With the new capacity expansion completed and assuming double digit
PT. Huddleston Indonesia 60.06% growth for the second semester of 2018, we are targeting SRIL to trade at
Founder Shares 0.04% 7x 2019F PE, which is around IDR 510 per share or 51% potential upside
Public (below 5% each) 39.90% within one year. BUY
2013 A 2014 A 2015 A 2016 A 2017 A 2018 F 2019 F Financial Highlights 2020 F USD/ IDR – YE (IDR)
Sales (In USD Mn) 450.7 554.6 622.0 679.9 759.3 1040.9 1161.6 1276.2 2017 13,480
FOUNDER SHARES PT HUDDLESTON
INDONESIA
PUBLIC 0.04%39.90% 60.06%
PT BITRATEX
99.9% GOLDEN LEGACY PTE LTD GOLDEN MOUNTAIN TEXTILE AND TRADING PTE LTD
100% 100% Indonesia Singapore
INDUSTRUES PT PRIMAYUDHA MANDIRI JAYA 0.00264% 0.003045% 99.99736% 99.996955% Chart: The new company structure after the acquisition
PT SINAR PANTJA DJAJA
Chart: Sales Contribution 1H2017 Chart: Sales Contribution 1H2018 Garment, 22% Garment, 25% Yarn (Spinning), Yarn (Spinning), 39%
48% Fabric (Finishing), Fabric (Finishing), 22% 25% Greige (Weaving), 11% Greige (Weaving), 8%
Source: company Source: company
Chart: Production Capacity YoY 30,000,000 Garment (pc/Year) 14,000,000 240,000,000 Finishing ( Yard/Year) 120,000,000 180,000,000 Weaving/ (Meters/Year) 120,000,000 954,000 Spining (Bales/Year) 566,000 50,000,000 100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 2018F 2017A 2016A 2015A Source: company
Table: Income Statement In USD. Million YoY Source: Company and Binaartha
Other Income (19.6) (28.4) (33.5) (49.4) (62.5) (83.3) (81.3) (89.3)
72.1 94.7 104.5 114.9
66.0
64.6
66.0
44.2
PBT
94.4 98.1 115.5 134.7 178.0 185.9 204.2
NIAT
63.8
Operating Income
Operating Expense (33.5) (28.1) (35.3) (29.9) (36.6) (9.4) (34.8) (38.3)
Gross Profit 97.4 122.4 133.4 145.4 171.3 187.4 220.7 242.5
Cost of Sales (353.3) (432.2) (488.6) (534.6) (588.1) (853.5) (940.9) (1,033.7)
44.92 Income Statement (in USD.Mn) 2013 A 2014 A 2015 A 2016 A 2017 A 2018 F 2019 F 2020 F
Net Sales 450.7 554.6 622.0 679.9 759.3 1,040.9 1,161.6 1,276.2
Taxes (12.8) (15.4) (8.9) (6.7) (4.1) (9.5) (10.5) (11.5)
31.5
77.11 60.50 127.23
0.0
68.0
59.4
55.7
50.5
29.6
0.0 Net Profit
0.0
50.5
0.0
0.0
Minority Interest 0.0 (0.0) (0.0)
85.2 94.1 103.4
68.0
59.4
55.7
76.07
81.60
Cash Flow (in USD Mn) 2013A 2014A 2015A 2016A 2017A 2018F 2019F 2020F
14.78
Cash From Operating Activities 14.35 (112.73)
35.02 Change in WC (30.02) (177.25) 1.31 (15.15) (148.63) (34.46) (13.71) (24.32)
33.35
19.93 28.25 120.28
19.74
14.01
85.25 94.09 103.37 Depreciation
Capex (41.79) (86.57) (138.02) (98.35) (55.66) (240.55) (66.70) (70.03) Other non current asset 35.09 (33.55) 30.67 (30.48) 48.69 (9.27) (1.21) (1.15)
68.04
59.37
55.66
50.52
29.60
Net Income
76.71 64.14 (52.35) 171.06 113.72 114.07
Cash from investing activities (6.70) (120.12) (107.35) (128.83) (6.96) (249.82) (67.91) (71.18)
6.11
54.62
7.99
11.74 Beginning Balance
26.15 48.08 126.04 27.60 (76.97) (31.16) Net Changes in Cash (1.88) 75.50 (4.50) (16.61) 66.74 (51.16) (31.15)
cash from financing activities (9.53) 308.35
57.31 Equity 12.57 (8.66) (10.35) (5.01) 43.02 (68.40) (75.27) (82.70)
8.32
55.71
Long term bank loan (19.79)
0.00 other long term liabilities (2.31) 276.83 4.71 167.46
0.00
25.00
40.00
30.00 0.00 (30.00)
0.00
10.18 31.79 (84.38) (12.69) 16.37 (10.02) (5.77) MTN
85.2 94.1 103.4 EPS (in USD) 0.002 0.003 0.003 0.003 0.004 0.004 0.005 0.006 EBITDA 77.2 109.2 119.8 136.5 163.3 303.5 225.8 237.5 Table: Cash Flow In USD. Million YoY
Statement of Financial Position (USD.mn) 2013A 2014A 2015A 2016A 2017A 2018F 2019F 2020F
23.23
17.70
30.39
72.80 82.97 114.77
Long term bank loans
64.48 67.16 123.53 175.19 195.39 209.09 229.72
30.00 Total current liabilities 183.14
25.52 MTN
20.82
24.06
15.06
14.87
17.77
14.19
40.44
38.27 73.14 105.19 112.12 116.16 127.62 Other Short term liablities
31.67
34.08
18.29 MTN
69.70
0.01
0.00 Total Equities 189.57 231.41 276.73 331.10 442.16 459.00 477.82 498.50
0.00
0.00
0.00
0.00
0.01
0.02
Total Liabilities 269.08 467.43 506.61 616.07 750.74 866.94 878.94 951.11 Minority interest
0.00
Totalnon current liabilities 85.94 402.95 439.45 492.53 575.55 671.55 669.85 721.39
65.00 Other Long term liabilities 13.15 289.97 294.68 462.14 517.85 572.48 580.79 638.10
65.00
65.00
40.00
0.00
30.00
30.00
76.57 Short Term bank loans 100.93
62.45
Cash and cash equivalent
5.83
Other long term asset
32.26 Current Asset 192.15 326.24 323.14 378.02 645.05 648.55 644.81 701.50 Net Fixed Asset 250.03 322.60 440.88 519.30 546.71 666.98 700.33 735.35
30.71
31.23
14.73
20.35
8.03
5.57
7.01
Other current asset
56.65 Trade Account Receivable 60.80 129.24 102.18 149.56 188.96 260.22 278.78 293.53 Inventory 119.67 109.57 135.79 147.62 314.13 281.03 290.40 319.05
44.92
76.07
77.14 60.49 127.23
81.60
6.11
9.48
0.03
54.94
0.00
5.53
11.11
18.62
41.78
Trade Account Payable
0.00 Total non current Asset 266.51 372.62 460.24 569.14 547.85 677.39 711.95 748.11 Total Asset 458.66 698.87 783.37 947.16 1,192.90 1,325.94 1,356.76 1,449.61
0.00
0.00
23.13
26.71
19.33
43.02
7.00
12.76 LT investment
11.62
10.41
1.14
Total Liabilities and equity 458.66 698.87 783.35 947.17 1,192.90 1,325.94 1,356.76 1,449.61 Table: Statement of Financial Position In USD. Million YoY
- 81.1% 70.7% 10.2% 6.7% 14.6% 25.3% 10.4% 9.9%
1.0
1.05
1.28
0.76
0.75
0.48
0.62
0.61 Liquidity (x) Interest Coverage
1.7
1.7
1.6
1.2
1.1
1.1
0.10 Debt / EBITDA
1.2 Current Ratio
1.0
5.1
4.8
3.1
3.7
3.3
3.1
3.1 Per Share data (USD) EPS
0.002 0.003 0.003 0.003 0.004 0.005 0.005 0.006 BV
0.010 0.012 0.015 0.018 0.024 0.025 0.026 0.027 EBITDA/ Share
0.004 0.006 0.006 0.007 0.009 0.016 0.012 0.013
2.25
0.10
Ratio 2013 A 2014 A 2015 A 2016 A 2017 A 2018 F 2019 F 2020 F Growth (%YoY)
Debt / equity
Sales 24.1% 23.1% 12.1% 9.3% 11.7% 37.1% 11.6% 9.9%
OP 20.9% 47.8% 4.0% 17.7% 16.7% 32.2% 4.4% 9.9%
EBITDA 18.6% 41.5% 9.7% 14.0% 19.7% 85.8% -25.6% 5.2%
Net Profit 21.3% 70.7% 10.2% 6.7% 14.6% 25.3% 10.4% 9.9%
EPS
Profitability (%)
Operating Margin (%) 14.2% 17.0% 15.8% 17.0% 17.7% 17.1% 16.0% 16.0%
Ebitda Margin(%) 17.1% 19.7% 19.3% 20.1% 21.5% 29.2% 19.4% 18.6%
Net Profit Margin(%) 6.6% 9.1% 8.9% 8.7% 9.0% 8.2% 8.1% 8.1%
ROA (%) 6.5% 7.2% 7.1% 6.3% 5.7% 6.4% 6.9% 7.1%
ROE (%) 15.6% 21.8% 20.1% 17.9% 15.4% 18.6% 19.7% 20.7%
Solvability (x)
0.92
0.11
0.50
0.55
0.31
0.28
0.32
0.29
0.29 Debt / Tot. Asset
0.38
0.16
0.20
0.11
0.10
Table: Ratio Highlights YoY
Stock Ratings:
Buy : a recommendation to purchase the security with upside potential of 20% or greater Hold : a recommendation to neither buy nor sell a security with upside potential of 0-19%. Sell : a recommendation to close out a long position in a security with upside potential below 0% or negative.